Software and AI Claims Drafting After Fintiv v. Paypal

            On April 30, 2025 in the case of Fintiv, Inc. v. Paypal Holdings, Inc. the U.S. Court of Appeals for the Federal Circuit (CAFC) affirmed the lower court’s holding that claims in several of Fintiv’s patents were indefinite and thus invalid under 35 U.S.C. § 112, sixth paragraph.  The case originated as a patent infringement case against Paypal Holdings, Inc.  This decision is of interest because the resulting patent invalidations were not based on pre-existing prior art. Instead, the rejection/invalidations were based on claim indefiniteness, an often misunderstood area of patent law.

Take Home Points from Fintiv

1. A claim may be deemed a means plus function claim under § 112 ¶ 6 even if the claim does not utilize the term “a means for.”  Thus, claim terms like “operable to” and “configured to” could invoke an indefinite claim analysis. 
2. The CAFC has provided the following guidance for applying Section 112 ¶ 6 to patent drafting using one of two options: “(1) recite, in the claim, a function without reciting structure for performing the function and limit the claims to the structure, materials, or acts disclosed in the specification (or their equivalents), in which case § 112 ¶ 6 applies, or (2) recite both a function and the structure for performing that function in the claim itself, in which case § 112 ¶ 6 is inapplicable.”   Dyfan, LLC v. Target Corp., 28 F. 4th 1360 (Fed. Cir. 2022), Slip opinion at 7.  In Dyfan, the claim at issue involved the words “code” and “application” wherein the claim was drafted utilizing option 2.  The words “code” and “application” were deemed structural in nature rather than functional.  The CAFC sided with the patent owner and found that the claim was not indefinite.
3. If there is any question as to whether a claim may invoke a § 112 ¶ 6 issue, the patent application drafter should be very careful to adequately disclose the structure behind the associated function whether in the claim itself or in the specification. For a software patent, make sure that all algorithms are carefully delineated and described in detail in the specification just in case.  That is, use the specification as a backup. Don’t presume that the lack of the term “means for” in a claim will remove any § 112 ¶ 6 issue.
4. AI patent applications also need to meet the requirements of § 112 ¶ 6.  Claim terms like “generative pre-trained transformer” might impart additional structure as a backup if they are referred to in the written description.  However, as the Fintiv court admonished, make sure the specification doesn’t just parrot the claims language. The same goes for the word
5. Patent application drafters should review the claims for function-sounding nouns to try and avoid a § 112 ¶ 6 problem.  But if such language is deemed necessary, then make sure sufficient structure is included under options 1 or 2 above. This applies to any invention, whether mechanical, electrical, software-based, AI-based, etc.
6. Judicial review of AI patent applications under § 112 ¶ 6 may not be forthcoming for several years.  However, cases like Fintiv and Dyfan should be instructive to AI patent application drafters. Adequately disclose structure if a claim term could conceivably be viewed as a functional term invoking § 112 ¶ 6.  

Discussion

If a claim includes the words “a means for….” under § 112, ¶ 6, the claim will be treated as a means plus function claim.  The examiner (or Patent Trial & Appeal Board or a federal court) will determine if the written description has adequately described the structure for the means plus function claim.  If not, the examining attorney will likely issue a rejection of the claim under § 112 ¶ 6 as being indefinite.  Or in a lawsuit, the patent claims could be invalidated as happened in Fintiv.

Things get trickier where a claim does not actually use the term “means for.”  Where the claim undergoing review does not use the term “means for,” the presumption exists that the claim does not invoke § 112 ¶ 6.  Yet, this presumption can be overcome “by showing that the claim limitation recites ‘function without reciting sufficient structure for performing function.’ ’’  Slip opinion at 6.  Fintiv quoting Williamson v. Citrix Online, LLC, 792 F.3d 1339, 1349 (Fed. Cir. 2015)

The analysis of whether or not a means plus function claim is definite consists of two parts.  First, does the claim terminology itself denote sufficient structure such that one skilled in the art would understand that the claim denotes sufficient structure? If “yes,” no further inquiry is necessary, and the claim will stand.  If not, the specification is examined to determine if the “functional” claims term has been described within the specification with sufficient structure to make the claim definite.

One of Fintiv’s problematic “payment handler” claims read as follows: “a payment handler service operable to use APIs of different payment processors including one or more APIs of banks, credit and debit cards processors, bill payment processors.”   Slip opinion at 6.  Fintiv first argued that the term “operable to” is more often “used with structural terms rather than non-structural ones.”  Slip opinion at 8. The CAFC discounted this argument by stating that its case law does not provide such a blanket rule; the applicability of 112 § 6 depends on the specific context at issue.  The CAFC concluded that the claims reciting “payment handler” are configured to complete an action without providing any structure as to how the action is completed.  Slip opinion at 9. As such, the “payment handler” claims were means plus function claims even though the claims lacked the word “means.”

Fintiv next argued that its position was favored under Dyfan, LLC v. Target Corp., 28 F. 4th 1360 (Fed. Cir. 2022) because the payment-handler terms are a class of software structures under Dyfan.  Accordingly, the “payment-handler” claims cannot be “means” claims.  The CAFC did not buy this argument either, noting that Fintiv provided no expert testimony that a person skilled in the art would have understood that the words “payment-handler” connote a class of structures and known that recited claim functions could be implemented using “off-the-shelf” code or applications.  Such expert testimony was provided in Dyfan, causing the CAFC in that case to conclude that the at-issue claims were not in means-plus-function format.  Slip opinion at 9.  By way of contrast with Fintiv’s patents, the CAFC stated:

As used in the claims, the payment-handler terms are not more than a “black box recitation of structure that can operate as a substitute for “means . . .and “a person skilled in the art would not have understood how to implement the recited function.”  Slip opinion at 10.

Having found that the “payment handler” claims were means plus function claims that did not connote sufficient structure, the CAFC then evaluated the patents’ written descriptions and drawings to determine if “payment handler” was described with sufficient definite structure as to the “inputs, outputs, connections, an operations” of the payment-handler teams.  Why is the disclosure of definite structure important for a means plus function claims?  Because a disclosed definite structure is essential for a person skilled in the relevant art to understand how the claimed function is carried out.  If the specification provides sufficient detail as to the structure required for carrying out the function of a means plus function claim, the claim is definite for the purposes of § 112 ¶ 6.

The CAFC found that Fintiv’s patent specifications “for the payment-handler terms merely parrots the claim language.”  Slip opinion at 11.  The Court found that the specifications failed to detail the algorithm(s) required to carry out the functions of using the claimed APIs of different payment processors including one or more APIs of banks, credit and debit processors. The specification merely referenced the term “API” without detailing just how the APIs did their thing with the different referenced payment processors without providing detailed algorithms. In finding against Fintiv, the CAFC emphasized that the “the results of the operation of an unspecified algorithm” will not transform the disclosure of a general-purpose computer into the disclosure of sufficient structure to satisfy the definiteness requirement of § 112 ¶ 6.”  Fintiv quoting Aristocrat Techs.  Austl. Pty. Ltd. v. Int’l Game Tech., 521 F.3d 1328, 1335 (Fed. Cir. 2008).  As such, the lower court’s decision was affirmed – Fintiv’s means plus function claims are invalid under § 112 ¶ 6 due to indefiniteness.

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